Interest rate article in Moneywise mag about trackers

sammyjammy

Please see quote below, I've just looked at my terms and conditions of my Halifax tracker and can see no sign of this....

"Ray Boulger, senior technical manager at John Charcol, explains: "Minimum tracker levels have only just emerged as an issue because previously the base rate wasn't expected to fall as low as economists now expect. However, banks that have these limits will stop passing on the benefit of lower interest rates at a certain point, which is bad news for many tracker borrowers.

And if you are a Halifax borrower, then a clause in its terms and conditions could pose even more problems for you down the line.
Halifax reserves the right not to pass on base rate falls below a certain level – 3% in its case. However, it is unique in the fact that it reserves the right to revert to the normal technique of pricing trackers - and therefore increase the rate borrowers pay.
For example, if a tracker mortgage borrower pays Bank of England base rate plus 1%, and the base rate is 3%, then their pay rate will be 4%. If the base rate falls to 2% then Halifax does not have to pass on this 100 basis point saving, meaning the borrower continues to pay 4%.
If the base rate then rises back to 3%, Halifax reserves the right to increase the pay rate by a full percentage point – meaning the borrower’s pay rate is now 5%.
So, although their mortgage is base rate plus 1%, they are actually paying base rate plus 2%."


http://www.moneywise.co.uk/property-ladder/mortgages/article/2008/10/30/how-low-could-interest-rates-go?utm_source=Newsletter2008-10-31&utm_medium=Email&utm_campaign=ContentPromotion

minimike2

Its in the offer letter. I have mine sat next to me

sammyjammy

still can't find it, I'm sure its there somewhere, should it not be in the key facts as well? I see it in the booklet about terms of mortgage, I can see that they would have a minimum tracker amount but it seems crazy for the rate it tracks to increase and then not decrease as the base rate goes above 3% again...

domthered

what a joke - its tails they win heads you lose as per f======ing usual! If it's not in the key facts then surely there's an issue there for the FSA to investigate.....should we start complaining now, even though it might not happen, or wait and see......:mad: :mad: :mad: :mad: :mad: :mad: :mad:

minimike2

No its not a requirement of the KFI im afraid.

Lilyannsdad

Minimike2, can I just ask what makes you so sure that something like this is not required in the KFI? I haven't been able to get a straight answer out of the FSA on this issue and can't find anything that specifically refers to this situation.

My problem with all of this is that if there is an effective minimum loan rate and believe that such a "collar" should be clearly communicated to customers on the KFI and not buried in the lenders terms.

I appreciate that a minimum makes sense but if it has not been made clear then the customer has been misled.....................and in many cases the broker too! At best this can't be meeting the Treating Customers Fairly initiative.

zarjaz_2

Exactly the same T&C for my Abbey tracker....I think we should get ready to complain!

minimike2

Why would you be getting ready to complain? You agreed to the terms?

AspiringOmbudsman

My particular Abbey mortgage details are as follows and I hope it may help any Abbey Flexible Plus mortgage holders who read this:

I remortgaged to the 0.49% rate in March 2007 and there is a waiver of condition 13.6 (as listed in the December 2006 Flexible Plus Mortgage Conditions booklet) explicitly written by Abbey into my mortgage offer at Section 4 (Description of this mortgage). The waiver is as follows:

"The interest that we add to the Bank of England repo rate (known as the tracking differential and which is currently 0.49%), is not subject to change under condition 13.6 of the mortgage conditions."

For your information, condition 13.6 would allow Abbey to change the tracker differential from 0.49% once the Base Rate hits or goes below 3% - more worrying is the fact that it states that the Abbey does not have to reinstate the 0.49% differential once the Base Rate returns to 3% or greater! However, for unknown reasons, this condition does not apply to my mortgage and several others too (according to related threads), thankfully!

So it is clear that if the Base Rate hits 3% (as it has) or dips below it (which it might) then Abbey can only apply the 0.49% tracker differential i.e. for my specific mortgage the tracker differential rate is invariant. Hence, if the Base Rate falls to 2.5% I suggest that I will pay 2.99% as I cannot identify anywhere in theT&Cs that enables Abbey to impose a floor of 3% which has been mentioned on related threads. Condition 13.6 is effectively deleted by the waiver at Section 4 of the mortgage offer and it is at 13.6 where I can find the only reference to 3% in either the mortgage offer or the conditions booklet. In summary my particular mortgage offer has no floor and in an extreme example, if the Base Rate falls to 0% I will be expecting to pay 0.49%.

You should check your own mortgage offer and Flexible Plus Mortgage Conditions Booklet to see if the above applies to your deal.

All the best!

neverdespairgirl

domthered wrote: »

what a joke - its tails they win heads you lose as per f======ing usual!

Not exactly - people on trackers just above base rate (or even, for a few, below it) are going pretty well at the moment.

Lilyannsdad

........Why would you be getting ready to complain? You agreed to the terms?..........

Because the lender has a duty of care to treat customers fairly and if they haven't made such an important limitation clear, in the KFI or Offer for example, then they shouldn't be able to impose it.

Nationwide have a minimum level of 2.75% for BOE base rate and that is clearly stated on the Mortgage Offer.